FAQ »

We are frequently asked about banks, banking, bank ownership and financial institution management. Below are a few questions along with our answers to each. If you don't see your question & answer, or if you need more insight, please contact us.

» What do banks really do?
As part of our financial system, banks provide an efficient way to make funds available to those who need them. Banks, by focusing on raising deposits and making loans, achieve great economy of operation that reduces the cost of bringing together lenders, depositors (who place their funds in banks), and borrowers (customers who need to borrow money).
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» What is the "dual banking system"?
Banks can be chartered by either federal or state authorities in the United States—the dual banking system. It traces its origins back to the National Banking Act that created federal competition to state charted banks.
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» What is a savings bank?
A savings bank is a depository institution historically and primarily engaged in accepting consumer savings deposits, and in originating and investing in securities and residential mortgage loans; many now offer checking-type deposits and make a wider range of loans.
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» What is a savings and loan?
A savings and loan is a state or federally chartered financial institution that accepts savings and checkable deposits from the public and invests them primarily in mortgage loans. A savings and loan association may be either a mutual or capital stock institution, and may also make loans to businesses and consumers.
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» What is a credit union?
A credit union is a financial cooperative organization of individuals who have a common bond, such as place of employment or residence or membership in a labor union. Credit unions accept deposits from members, pay interest (in the form of dividends) on the deposits out of earnings and use their funds to provide consumer installment loans to members.
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» How do the regulatory bodies interface with the institutions?
After a financial institution opens for business, it operates according the organizers’ business plan. As with any business, that plan changes as necessary to meet economic and market demands. The regulators periodically perform onsite examinations to ensure safe and sound operations.
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• National Banks: Office of the Comptroller of the Currency (OCC)
• State, member banks: The State and the Federal Reserve System
• State, non-member bank: The State and the Federal Deposit Insurance Corporation
• Thrift institutions: The Office of Thrift Supervision
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» What do the financial institution regulatory bodies examine?
There are three basic types of examinations. First, the “safety and soundness” examination reviews the overall operations of the bank to ensure its operations are sound and offer little risk to the Deposit Insurance Fund (formerly known as the Bank Insurance Fund or BIF).

The second type of examination is the compliance exam, which reviews the banks operations to ensure the bank treats all persons fairly, equitably and in compliance with laws and regulations.

If the bank has trust powers, its trust operations are also examined.
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“The marketplace is normally the best regulator of economic activity, and competition within the marketplace promotes efficiency and better customer service. Accordingly, it is the OCC’s policy to approve proposals to establish national banks, including minority owned institutions, that have a reasonable chance of success and that will be operated in a safe and sound manner. It is not the OCC’s policy to ensure that a proposal to establish a national bank is without risk to the organizers or to protect existing institutions from healthy competition from a new national bank.”
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» When banks are examined, is there a rating assigned?
The rating assigned after a safety and soundness examination is known as CAMELS, an acronym for capital, asset quality, management, earnings, liquidity, and sensitivity. These are the six components of the examination. The rating is NOT made public.

The bank will also be subjected to a compliance examination, on which a rating is assigned. The Community Reinvestment Act mandates that a portion of the rating is made public.
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